Equitable nonprofit systems require formal structures that manage the human resources functions and the implementation of strong communication systems. This is Part 2 of a three-part series on nonprofit compensation. 

Formal Structures to Manage the Human Resources Functions

Creating an effective nonprofit compensation system goes beyond just setting salary rates. It requires that organizations provide clarity to their employees regarding how to behave ethically, what is expected of them, and how they fit into the organizational structure. Employees must also understand what standards they must meet in order to get a raise. The following strategies help employees understand their rights and responsibilities within the organization:

• Updating the human resources manual: There must be an updated human resources manual that outlines the organization’s history and structure; mission and vision; compensation and benefits policies; general policies and procedures, including conflict of interest; and procedures for appealing decisions or reporting problems. Naturally, as laws or the environment change, the HR manual must be adjusted accordingly.   
• Ensuring all organizational policies and procedures conform to legal regulations. There is an appropriate paper trail of matters related to compliance in real-time that produces a record of all activities. This includes records of overtime, any flexible working arrangements, vacation time that is used and unused, carryover arrangements for sick days or vacation time, etc. 
• Consistently and equally applying policies and procedures. The policies and procedures in the organization must be consistently adhered to and applied equally to all staff/ board members and/or volunteers. This helps staff understand expected behaviors, and what is required of them to ensure continued employment in the organization. Equal implementation of policies and procedures also fosters an environment in which the staff feels like they are working for an ethical organization, even if they don’t necessarily agree with every decision. 
• Aligning the annual performance review with a talent/ professional development plan, which should be in place for all employees. This includes allowing space for employees to jointly develop professional development plans. Of course, this plan must be aligned with the annual review process where measurable goals and strategies to support an employee’s development should be established. Subsequently, employees should receive support from their managers as they strive to reach their performance goals. 
• Updating job descriptions as the actual work that employees perform changes. This will help to determine if an employee needs to be reclassified, requires a salary adjustment, and/or necessitates a change in title. The job description should include the following, as is relevant to the position:
  • Program outcome goals
  • Education
  • Program outcome goals
  • Technical skills Program skills
  • Language(s), spoken, written
  • Communication skills (oral and written)
  • Administrative and management skills
  • Previous experience
  • Interpersonal skills
  • Ability to organize multiple demands
  • Expectations about travel, stress load, overtime, and salary 
• Creating and analyzing salary benchmarks. This includes creating salary categories and a rationale for the high, mid, and low ranges for various types of employees. For example, senior executives; highly specialized workers; managers; and direct care, administrative, and clerical staff. This should also allow your hiring team to determine how competitive the salaries in your organization are. It also helps employees understand what they can reasonably expect from their efforts. For information on how to conduct a salary comparison, please click here to Part I – Compensation Systems.

Implement Strong Communications Systems: 

Discussing nonprofit compensation can be an uncomfortable experience. This is particularly true in organizations where employees are over-extended, and they feel underpaid or have not received raises in various years. A strong and transparent communication system that is values driven is a practice that will yield many benefits. Employees will understand how they will be compensated, and what remuneration range they can expect as they move up the organizational chart in the organization. It also helps to remind employees that decisions are made based on fair market value and are not driven by the personal preferences of administrators.

In addition, the organization works better when all employees understand how they are supposed to do their jobs, what is required of them to continue employment, the standards they must meet in order to receive a raise, and how any changes that affect their jobs. The following strategies help to achieve these objectives:

• Communicating changes to affected staff. There is a communications plan that is consistently implemented to ensure staff, board members, and volunteers are informed of all relevant happenings affecting their jobs or the organization. This is done personally, in supervision meetings, via memorandums or emails, and/or staff meetings. 
• Clearly describing the total compensation package to employees various times a year. This includes holding sessions to remind employees of how the benefits work or to explain any changes. This includes changes in health plans, compensation packages, Cost of Living Adjustments (COLAs), overtime compensation (particularly during travel), bonuses, vacation policies, flexible work schedules, work-from-home policies, holiday closings, etc. 
• Regularly scheduling supervision sessions with employees throughout the year. This helps employees understand how they are progressing on the annual performance objectives. Thus, expectations are not only outlined in the annual review, they are enforced all throughout the year. It is also an excellent opportunity to communicate important information that is relevant to an employee’s job. Employees are subsequently clear about what is required of them in order to receive salary increases and continue employment in the organization. 

Next time, in Part 3, we will discuss Nonprofit Executive Compensation and Compliance Requirements.

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